US tariffs on steel sector unlikely to impact India materially: Crisil

New Delhi:  The US tariffs on the steel sector are unlikely to impact India because only 2 per cent of the country’s total finished steel exports in the first nine months of this fiscal were to the US, Crisil Intelligence said on Tuesday.

The US move to slap a flat 25 per cent tariff on steel imports from March 12, compared with multiple types of lesser levies previously, will have a three-fold impact.

“One, it will lower the exports of its trade partners as local production rises, but India is unlikely to be impacted materially because only 2 per cent of its total finished steel exports in the first 9 months of this fiscal were to the US,” said Sehul Bhatt, Director- Research, Crisil Intelligence.

Two, there will be a diversion of exporter inventory to other importer-nations at aggressive prices, especially in a milieu of increasing global competition.

This could bring down the prices of steel in India, already trending at 4-year lows, further.

“That means the Indian government may have to step in with safeguard duty to support domestic capacities. The timing and quantum of this will be crucial,” Bhatt noted.

Three, incremental production by US mills will mean a reduction in the steel scrap available for exports.

That is because, as much as 70 per cent of the steel industry there uses the electric arc furnace process, which typically involves converting scrap to produce steel.

At present, India sources 14-15 per cent of its scrap requirements from the US.

Key import sources for the US include Canada, Brazil, Mexico and South Korea. In 2024, the US witnessed a sharp rise in steel exports from Vietnam, Taiwan and Brazil.

While, on the one hand, the US tariffs may open up a portion of the US market for India’s steel exports, on the other hand, the surplus steel produced by Japan and South Korea may be diverted to the Indian market, according to a latest ICRA report.

–IANS